A Model and Direction for Future Research
Marc R. Parise
2 Bay Hill Drive
Coal Valley, IL 61240
DBA Student, St. Ambrose University
Davenport, IA 52803
CEO selection is one of the most important events in the life of an organization. It has never been more critical than it is today. The purpose of this paper is to use the existing literature to identify the most important variables in the selection process. A direction for future research of the effect of these variables on the selection process is suggested. Finally, a model of the variables and their influence on the selection process is developed.
CEO Selection: A Model and a Direction for Future Research
CEO selection has never been more critical to the success of an organization (Khurana, 2001). The events of 9/11 have put an exclamation point on the importance of leadership, and the increase in large corporate bankruptcies is reflective of a very challenging economy. Succession is an extremely crucial decision for a company (Guthrie & Datta, 1998; Sessa & Taylor, 2000). Twenty percent of the U.S.’s largest companies replaced their CEOs in 2000 versus about 11% in 1999 (Leonard, 2001). Replacement of the individuals in these positions is a very complex process. There are an extremely limited number of candidates capable of leading strategic change (Lawler & Finegold, 1997), and the job is unique in each situation (Rock, 1977), making the search for the right person more difficult. Due to changes in the environment, the cost of an error in CEO selection has been increased (Gupta, 1992). As many as one-third fail, with another one-third are performing at a mediocre level (Sorcher, 1985).
Researchers suggest future studies should focus on identifying strategic and organizational variables that might mediate the relationship between CEO tenure and organizational performance.The purpose of this paper will be to identify strategic, organizational, and human variables that are significant to CEO selection. This paper will not address external variables such as environment or competition. While these are important to the selection process, because of the major effect they have on performance of organizations, they are beyond the scope of this treatment. This subject is important for researchers because it sets forth testable propositions for this understudied area. It is important for practitioners because of the very significant consequences that errors in CEO selection have.
CEO succession and CEO selection should be studied together; these subjects have not been well researched (Hollenbeck, 1994). One reason is that research is particularly difficult in this area due to the secrecy that surrounds the process in most organizations. Hollenbeck (1994) concluded that very little significant literature on CEO selection is available. His treatment of the selection process reviews the relevant work published to the time of his book in 1994. This paper uses his review of that work and extends the literature review since that time in an attempt to create a researchable framework of the most important internal variables in CEO selection.
I have organized this paper around the seven areas that appear to receive the major focus in the literature. These are: Organizational Strategy, Boards of Directors, Position Requirements, KSAs, Incumbents, Outside Candidates, and Selection Resources. Since these areas receive the lion’s share of the attention in the literature, it is important that these areas be researched in order to determine their affect on CEO selection. Propositions have been created for each of these areas to suggest an avenue for further study of this topic, and a model of the effect of each of these areas on the selection process is developed. Many of the propositions refer to...